Articles

CTC Guide: Why Entering Emerging Markets is Complex for Treasurers

By Staff Writers

Published: 9/9/2014

When establishing treasury operations in a new emerging market, the responsibilities are generally the same. But the peculiarities of a different market can make these tasks more complex, and a new CTC Guide, sponsored by Reval, looks at why.

Certain treasury activities which may be taken for granted in a home or developed market, such as opening a bank account or effecting a cross-border payment, present a significant challenge in terms of time or documentation. Leadership in Treasury: Entering New Emerging Markets aims to help treasurers understand where the potential pitfalls lie so that they can plan the move into a new market much more efficiently.

For example, in any new market, it can be difficult for treasury practitioners to forecast cash flows accurately. In the case of a move into an emerging market, additional complications exist for a number of reasons. Levels of functionality which are standard in the company’s established markets may not be available in an emerging market. Relatively common hedging techniques may not be cost-effective or even available because of a lack of liquidity in the local market. Local exchange control regulations may make cross-border wire transfers, used to support activities across the rest of a multinational group, expensive or impossible. These differences in emerging markets can arise from surprising sources.

“Globalization is driving strategic decision-making in order to build shareholder value and accelerate revenue growth,” said Jason Torgler, vice president of Reval. “Historically, treasury was reactive and informed at the tail of the globalization decision-making process. Currently, in leading treasury departments, treasury is taking a more proactive position in understanding opportunity and identifying risk within the review of their company’s globalization strategy.”